Accounting World

In: Business and Management

Submitted By santanughosh
Words 13188
Pages 53
ACCOUNTING

Evolution: Accounting can be traced back to the evolution of the number system itself. It has been there in one form or the other, since the human beings started exchanging things. In ancient times the “kings” or “monarchs” used to maintain “treasury records”. They used to keep records of the incomes and expenses to the treasury.

However, the real beginning can be traced to the reference to double entry system in the book published about 500 years ago. It was the great Italian Mathematician, Luca Pacioli, who authored the book and got it published in 1494. Every transaction has two aspects. The double entry system provides for recording both aspects of a transaction in such a manner as to establish an equilibrium.

Barter System: A system, in which goods are exchanged for goods, is called “Barter System”. For example, A to A has some surplus wheat and he wants to have a goat. A to B has some goats and he wants some wheat. Now, when they meet, the wheat is exchanged for goat .This is called “Barter”. This system of exchange was prevailing before the invention of money.

Money: In order to overcome the limitations of barter system the “money” was invented. Money is a medium of exchange. In ancient times a piece of leather served as money. Later, gold coins, copper coins, iron coins with the stamp of the King etc., were used as money. In the modern times, paper money is used. For example, Rupees, dollars etc., in the form of printed paper act as money. Now A to A can sell wheat to some body and get money and with this money or a part of it, he can buy goat. A to A need not go in search of a person who can exchange goat for wheat.

Definitions:

Business: An entity which carries on trading /manufacturing and selling of goods and services for a profit is called ‘business’. The main intention of a business is to make profit, while trading…...

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